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Retrenchment or Downsizing

In challenging economic times museums often experience a dramatic loss of income from multiple sources, including endowments, parent organizations, funding agencies, admissions and museum store sales. In response, many museums make changes in their governance, staffing, and operations. These actions can be necessary and appropriate steps in securing the museum’s future. Sometimes, however, downsizing or retrenchment is mistakenly assumed to be an indicator of bad management. This standard addresses the issues of downsizing and retrenchment, and how they may affect museums.

Downsizing and retrenchment can be responsible and necessary corrective actions in response to financial reductions. When preparing for retrenchment, museums: focus on retaining their ability to fulfill their mission and serve their community; take actions consistent with the highest ethical, fiscal and management standards in the museum field; and carefully consider the effect of their actions on their staff, their community and the collections they hold in trust for the public.

The following observations provide guidance regarding the application of these standards to issues that commonly arise when a museum is considering downsizing or retrenchment.

Collections

Collections often receive special scrutiny during retrenchment either because of the expense of maintaining them appropriately or because of their potential as financial assets. In considering the role of collections in retrenchment, museums are guided by the following principles.

Collections are held in trust for the public, and a primary responsibility of the governing authority is to safeguard this trust. The museum may determine that it is unable in the long run to appropriately care for some parts of its collections. In such cases, the most responsible action may be to deaccession and transfer material to another suitable caretaker in an orderly manner that safeguards the collections and their documentation. Museums may carefully consider whether it is appropriate for the material to remain in the public domain at another nonprofit institution or whether it can responsibly be placed through public sale. Deaccessioning, however, is never a fast or simple solution. It may take a great deal of time and other resources to research the material in question, determine its provenance, identify any restrictions on the title and arrange for an appropriate and safe transfer. In the short run, it may actually require additional expenditures on the part of the museum to conduct the necessary research, prepare the documentation, arrange for disposition and affect the transfer. Deaccessioning is part of a long-term, thoughtful decision on the part of the museum about how best to fulfill its mission with available resources. It is conducted in accordance with standards and best practices in the field, and with the museum’s own code of ethics, collections planning and collections policies.

Various statements of ethics in the museum field prescribe what can be done with the funds resulting from deaccessioning. All museums are expected to abide by the Alliance’s Code of Ethics for Museums and by any additional codes of ethics particular to their discipline. The Alliance’s Code of Ethics for Museums specifies that proceeds from sales resulting from deaccessioning can be used only for acquisitions or direct care of collections. While the interpretation of “direct care” varies between museums and disciplines, there is a strong consensus that it does not include use of funds to pay operational expenses. The code of ethics of the Association of Art Museum Directors (AAMD) explicitly specifies that art museums can only use funds resulting from deaccessioning for the acquisition of new collections, and that of the American Association of State and Local History (AASLH) specifies that history museums can use such funds only for acquisition or preservation.

There is increasing pressure on museums to capitalize their collections and to use them as collateral for financial loans to the museum. The Alliance’s Code of Ethics for Museums requires that collections be “unencumbered,” which means that collections cannot be used as collateral for a loan. The AAMD code of ethics also precludes using collections as collateral, and further bars museums from capitalizing collections. The AASLH has also issued a position statement that declares that capitalizing collections is unethical.

A museum’s collections are valuable only insofar as they are accessible to the public and to scholars and the information inherent in them is preserved through documentation and the knowledge of those who care for them. “Mothballing” collections, i.e., putting them in storage and eliminating or minimizing curation and use, may seem a desirable short-term strategy for cost reductions, but it carries measurable risks. Many kinds of collections are not stable in storage without constant monitoring and attention. Often, collections can be made accessible in a meaningful way only through the mediation of an experienced, knowledgeable staff that, once dismantled, may not easily be rebuilt.

Human Resources

Museums often reduce staff size in response to financial reductions. This may be accomplished by leaving positions temporarily unfilled, eliminating individual positions or eliminating whole departments or program areas. In considering the reduction of staff as a part of retrenchment, museums consider the short-term and long-term needs of the institution. Leaving a position vacant when a staff member departs is less traumatic than laying off existing staff. It can also, however, leave key positions and vital roles unfilled at a crucial time. Museums weigh the needs of the staff and the needs of the institution in choosing a strategy for staff reductions.

Museums also consider the impact of downsizing on the museum’s programs and operations. The museum’s mission is accomplished primarily through its staff, but many museums also rely on volunteers and partnerships with other institutions. Staff reductions are planned in light of the overall impact on the museum’s mission and activities and as part of an overall strategy for scaling back operations, supplementing paid staff with volunteers or partnerships or other strategies for accomplishing the museum’s goals.

Museums in Non-Museum Parent Organizations

Museums that are part of a college or university or organized under municipal, county or state government have additional factors that affect their response to a financial crisis. When parent organizations need to make financial cuts, the museum may bear a disproportionate portion of the burden. Many museums within larger parent organizations have increased their financial stability by cultivating diverse sources of income. This is particularly important to museums in parent organizations. Museums that derive significant portions of their income from outside sources are less dependent on funding from their parent organizations. This minimizes the impact of funding cuts from the parent and the likelihood that the parent will see eliminating the museum as an attractive financial strategy.

Museums can also develop a separately incorporated friends organization. A separate 501(c)3 support group can provide significant income, serve as an advocate for the museum and buffer it against sudden organizational changes. A formal memorandum of agreement between the parent and the friends group can ensure that the support organization has a voice in any decisions concerning the museum’s future.

Another strategy is to embed the museum in the parent organization’s operations. A museum that is an integral part of its parent organization is less likely to be an immediate target for financial reductions by the parent. By being strongly connected to the community served by the parent, reaching out to a broad constituency, attracting new sources of funding, garnering positive publicity and, most of all, being valued by a large number of people, a museum makes itself less vulnerable to cutbacks. An active and engaged constituency will encourage the parent organization to continue its support.

Parent organizations usually have no legal obligation to continue to operate a museum. They may not consider the possibility that the museum could lose accreditation as a result of changes made as part of retrenchment. The Alliance, representing the public’s interest of stewardship of collections held in the public domain, urges parent organizations to take into account the following moral, ethical and practical issues. First, museums are a part of an institution’s long-term strategy of civic engagement. Any decisions regarding the future of museums operated by a parent organization should take into account their long-term role in serving the broader public good. While in the short run, cutbacks to a museum may result in financial savings, in the long run they may damage the parent organization’s ability to serve its community and reach out to a broad audience. And second, museums operate in the public interest and hold their collections as a public trust. If a parent organization is considering downsizing or closing a museum, it has an ethical obligation to do so in a manner that safeguards the public’s interest. The fate of the collections must be carefully considered. Having taken on the obligation of caring for collections, the parent must plan to transfer this stewardship to another suitable caretaker in an orderly manner that safeguards the collections and their documentation. The new caretaker should be carefully chosen with attention to its ability to care for the collections and to continue to provide public and scholarly access. As discussed earlier in this standard, this process may require additional resources in the short term and may not be a useful strategy for immediate cost savings.

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